D’Works Animation unveils Q1 profits

'Megamind' home biz boosts studio in rather lackluster quarter

DreamWorks Animation’s “Kung Fu Panda 2″ has some heavy lifting to do this year.

Sequel will generate a majority of the studio’s revenue this year, considering that the company’s other release in 2011, “Puss in Boots,” doesn’t bow until November.

By then, “Panda 2″ will have its worldwide B.O., DVD sales and the release of a new TV series on Nickelodeon to count.

First film continues to add more coin to DWA’s coffers, with the 2008 pic earning $12.1 million during the first three months of the year, mostly from international TV sales.

Results were reported as DWA posted first quarter earnings, which came in lower with no pics in theaters.Overall, revenue came in at $108 million, down from $162 million for the same three-month period a year ago, while profits fell to $8.8 million, from $21.7 million, for the quarter that ended March 31.

“DreamWorks Animation’s first quarter of 2011 was driven primarily by our 2010 films, including ‘Megamind,’ which had a solid performance following its Feb. 25 release into the home entertainment market,” said Jeffrey Katzenberg, CEO of DreamWorks Animation.

Last month, DWA skedded six pics to fill out its slate through 2014.

Those include three sequels based on “Kung Fu Panda,” “Madagascar” and “How to Train Your Dragon,” as well as spinoff “Puss in Boots,” and originals “Rise of the Guardians,” “The Croods,” “Me and My Shadow,” plus adaptation “Mr. Peabody & Sherman.”

DreamWorks has “steered away from” pics that parody other films and genres after “Shark Tale,” “Monsters vs. Aliens” and “Megamind” struggled to appeal to audiences overseas with sendups of mob, monster and superhero movies.

Although successful in the U.S., “they did not travel as well internationally,” Katzenberg said. “We don’t have anything like that on the production schedule now.”

During the first quarter, DWA saw most of its revenue come from homevid sales, with “Shrek Forever After” earning the most among its titles, collecting $19.9 million. That was followed by “Megamind” ($18.1 million) and “How to Train Your Dragon” ($8.7 million) rounding out the top earners from disc sales. “Madagascar 2,” however, also contributed a healthy $19.1 million, primarily from domestic and international TV sales.

Overall, DWA’s catalog of pics earned $19 million, while its non-film business, including such touring shows as “Shrek,” earned another $11 million. Half of that came from the “Shrek” show alone.

In addition to a “Kung Fu Panda” series launching on Nickelodeon around Thanksgiving, DWA will also introduce a “Monsters vs. Aliens” show on the kids cabler and a “How to Train Your Dragon” series on Cartoon Network next year.

Despite a depressed B.O. so far this year, “animated movies are the single most successful thing in the marketplace,” Katzenberg said, citing the success of such films as “Rango” and “Rio.”

But “what’s made them stand out is how badly everything else has done,” he added. “It’s a lousy marketplace.”

In a conference call with analysts and investors, Katzenberg passed on discussing premium VOD, despite other studios embracing the window, saying it’s “not a business of ours.” The audience that would be attracted to getting pics 60 days after they bow in theaters for $30 “is not our customer and not relevant to us today.”

DreamWorks Animation has long remained slow to embrace new distribution platforms, even holding off on putting its pics on Blu-ray, given the buying habits of its customers.

Katzenberg said the company will remain cautious moving forward, despite the emergence of new distribution platforms.

“The rate of change occurring in consumer habits and the impact of existing, as well as perceived imminently coming new technology and new delivery, has created a market that, at best, is unformed,” he said. “We think it’s going to stay in this unsettled state for the foreseeable future for the next 18 months. We don’t see a clear set of winners and losers yet so we’re keeping our options open.”

Katzenberg, however, was upbeat on Netflix’s plans to pursue digital streaming rights to more films.

He called the rental firm “another buyer” and “another aggressive one,” that helps “reaffirm the value of” the company’s films.

“How that plays out in the coming years is a little early to tell but I know it’s good news,” he said.

Katzenberg also declined to discuss details on the studio’s plans to keep its distribution deal at Paramount, which expires at the end of 2012.

“As I have (said) for five years and one quarter, Paramount continues to do an excellent job for us,” Katzenberg said, adding that DWA won’t likely address any talks until this time next year, at the earliest.